Sunlands Technology Group (STG) Stock: Why The Price Surged Today

By Amit Chowdhry ● Nov 23, 2021
  • The stock price of Sunlands Technology Group (NYSE: STG) increased by over 25% during intraday trading today. This is why it happened.

The stock price of Sunlands Technology Group (NYSE: STG) increased by over 25% during intraday trading today. Investors are responding positively to Sunlands Technology announcing its unaudited financial results for the third quarter ended September 30, 2021.

Q3 2021 Financial and Operational Snapshots

— Net revenues were RMB595.1 million (US$92.4 million), representing a 9.9% increase year-over-year.

— Gross billings (non-GAAP) were RMB462.5 million (US$71.8 million), representing a 29.3% decrease year-over-year.

— Gross profit was RMB512.0 million (US$79.5 million), representing a 14.1% increase year-over-year.

— Net income was RMB92.8 million (US$14.4 million), compared with net loss of RMB165.8 million in the third quarter of 2020.

— Net income/loss margin, defined as net income/loss as a percentage of net revenues, increased to 15.6% from -30.6% in the third quarter of 2020.

— New student enrollments were 93,265, representing a 33.8% decrease year-over-year.

— As of September 30, 2021, the Company’s deferred revenue balance was RMB2,540.9 million (US$394.3 million).

Outlook

For Q4 2021, Sunlands currently expects net revenues to be between RMB590 million to RMB610 million, which would represent an increase of 0.9% to 4.3% year-over-year.

KEY QUOTES:

“We are pleased with our third quarter financial metrics. Our net revenues grew 9.9% year-over-year to RMB595.1 million despite the evolving industry dynamics. As we resolutely executed our balanced long-term growth and profitability strategy, we recorded net income of RMB92.8 million compared with net loss of RMB165.8 million during the same period last year, notwithstanding a year-over-year decline in new enrollments and gross billings.”

“Our professional certification and skills programs continued to excel during the quarter with net revenues up 148.2% year over year and our net revenues from master’s degree-oriented programs also increased by 20.8% year over year, driven by our constant efforts to broaden our course catalog as well as strong user demand for career advancement and skills enhancement. We maintained profitability for two consecutive quarters as we enriched our course offerings to address varied student needs and optimized cost structure to enhance student acquisition efficiency with more cost-effective, innovative and regulation-compliant marketing tools. We will continue to refine these measures to build on this success and drive quality growth.”

“With China’s national policy of building a lifelong learning society in place, we are optimistic about the growth prospects of occupational education business and will contribute to this great undertaking by providing our users more premium courses with enhanced services.”

— Tongbo Liu, Chief Executive Officer of Sunlands

“We are encouraged by our sustained profitability in the third quarter with registered net profit reaching a new high, driven by continued year-over-year top-line growth mainly attributable to professional skills and master’s degree-oriented programs. Profits also benefitted from our efficient cost control measures, which led to a 35.2% year-over-year reduction in operating expenses. Notably, sales and marketing expenses as a percentage of net revenues decreased significantly, by 45.7 percentage points year-over-year. Going forward, we will continue to focus on operating efficiency enhancement, product mix optimization and service improvement, preparing us for opportunities and challenges ahead while pursuing sustainable growth.”

— Selena Lu Lv, Chief Financial Officer of Sunlands

Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis.